An “RESP” (a Registered Education Savings Plan) is similar to an RRSP in that it uses “registered” savings to tax-defer the growth in the plan. An RESP is often used to save for a child’s post-secondary education, but can be used for anyone planning to attend a qualifying program.
For children’s RESPs, the government also contributes between 20-40% (to a maximum) through the Canada Education Savings Grant (CESG). As with the RRSP, the earlier you open an RESP, the longer your savings have to grow.
While it’s not crucial that you use an RESP to save for education costs, it is important to plan how and who will be covering the cost. As we all know, the cost of a post-secondary degree is climbing and, with inflation, it’s a whopping big number. The Globe and Mail points out a few things to keep in mind about RESPs and if you’re in BC, don’t miss out on the age 6 BC Training & Education Savings Grant (BCTESG) of $1,200.
There are a number of questions to ask, before opening an RESP (here is a short list):
- Are there any fees (account opening, annually, transfers out, closing the account, etc.)?
- What are the investment choices available?
- What happens if the child does not attend a qualifying program?
For more information, visit:
Government of Canada Guide to RESPs